Thank you, Elizabeth. Morning, and welcome to Ally Financial's second quarter 26 earnings call.

This morning, our CEO, our CEO, Michael G. Rhodes; and our CFO, Russell Hutchinson, will review Ally's results before taking questions.

The presentation we will reference can be found on the Investor Relations section of our website ally.com. Forward looking statements and risk factor language governing today's call are on page 2, GAAP and non GAAP measures pertaining to our operating performance and capital results are on Page 3.

As a reminder, non GAAP or core metrics are supplemental to and not a substitute for US GAAP measures. Definitions and reconciliations can be found in the appendix.

And with that, I will turn the call over to Michael.

Thank you, Sean, and good morning, everyone. I appreciate you joining us today.

Second quarter results were solid and reflect the progress we have made over the past several years to build a more focused, higher performing company. The strategic choices we have made are creating a franchise with meaningfully greater earnings power.

We are seeing that reflected not only in margin expansion and strong operating performance, but also our ability to invest for growth, while simultaneously increasing capital returns to shareholders. Simply put, our results demonstrate our strategy backed by disciplined execution is working.

The Ally today is fundamentally stronger. We believe this positions us well to further enhance profitability, support customers through economic cycles, and create long term shareholder value.

For the second quarter, adjusted EPS of $1.21 was up 22% year over year while core ROTC increased to 11.8%. Adjusted net revenue of $2.3 billion increased 10% year over year.

Reflecting continued asset growth and further margin expansion. To the point, retail auto and corporate finance assets grew nearly $8 billion year over year.

that is up 8% year over year. And NIM improved 11 basis points sequentially to 3.63%.

Our balance sheet continued to strengthen during the quarter, with CET1 increasing 20 basis points year over year. That strength is providing greater capital flexibility Since announcing our authorization in December, we have returned more than $300 million to shareholders, through share repurchases.

Taken together, these results reflect improved earnings power, increased capital flexibility and a company that is better positioned to perform through the economic cycles. Importantly, we are seeing broad based momentum across the company with each of our core franchises executing well and contributing to our performance.

That momentum is supported by investments we have made to strengthen both the Ally brand and our culture. Our revitalized marketing campaign life today, is resonating with customers and highlighting the unique value proposition of Ally.

Meaning customers where life and money intersect in today's world. We continue to see encouraging results in brand health, awareness, engagement, and industry leading retention.

Equally important, our culture remains a meaningful competitive advantage. Employee engagement scores improved again this year, and ranked the top decile of companies nationally for the 7th consecutive year.

With particularly strong improvement across measures such as belief in our strategy. We believe highly engaged employees aligned around a clear strategy create better experiences for our customers, and ultimately drive stronger business outcomes.

With that, let's turn to page 5 and discuss performance across our core franchises. Starting with Dealer Financial Services, our dealer centric through the cycle approach remains a key differentiator and a meaningful competitive advantage.

Within auto finance, applications reached a record 4.6 million increasing 17% from a year ago validating our strong value proposition and strategic initiatives are resonating with dealers more than ever. This application volume support originations of 13.3 billion up 21% year over year.

While maintaining approval and pull through rates. Retail origination yield of 9.1% included 47% S tier reflecting seasonal dynamics and our measured approach to navigating the current operating environment.

Consumers have remained resilient and we are encouraged by the credit performance across our portfolio. At the same time, we are mindful of the cumulative headwinds from ongoing inflationary pressures and evolving macro backdrop.

Insurance delivered another solid quarter with written premiums of $382 million up 9% year over year. As we continue to demonstrate an ability to deepen relationships and highlight our unique full spectrum value proposition to dealers.

In corporate finance, we delivered record pretax earnings and continue to see strong client demand and a attractive opportunities for disciplined growth. The portfolio ended the quarter at $13.7 billion that is up 25% from the prior year.

While generating a 32% return on equity. Our success is built on long standing client relationships deep underwriting expertise, speed of execution, and the ability to provide certainty when our clients need it most.

We remain focused on profitable growth while maintaining the credit discipline that is consistently differentiated this business. Now turning to the digital bank.

Customer growth and engagement trends remain strong. Retail deposit balances ended the quarter at $144 billion with deposits representing 87% of total funding and providing a stable and cost efficient funding source for the company.

We now serve 3.6 million customers up 7% year over year and marking our 69th consecutive quarter of customer growth. Importantly, much of that growth is coming from younger consumers, who are highly engaged in our digital platform.

Nearly 70% of new accounts come from millennials and younger consumers, typically beginning with average balances just under $10 thousand and growing over time. As consumer preferences increasingly shift towards digital first experiences, we believe Ally's trusted brand national scale, and low cost operating model positions us exceptionally well for the future.

Taken together, these results demonstrate the increasing strength of our core franchises. We are growing in businesses where we have clear competitive advantages, generate attractive returns, and deepening customer relationships across the company.

While there is more work ahead, we remain confident in our path forward. We believe the benefits of our strategic will continue to accumulate positioning Ally to deliver higher profitability and stronger returns over time.

And just as importantly, those same actions are creating a more resilient company that, we believe, is well positioned to perform through economic cycles. And with that, I will turn to Russell to discuss the quarter in more detail.

Thank you, Michael. I will begin by walking through second quarter performance on Slide 6.

Net financing revenue, excluding OID of $1.7 billion was up 11% year over year. Balance sheet growth in our core portfolios, and lower funding costs supported continued NII expansion.

Adjusted other revenue of $573 million was up $42 million year over year as we continue to see momentum across our diversified revenue stream. Insurance, smart auction, and pass through programs.

Provision expense of $430 million was up $46 million year over year. As CECL reserve builds associated with strong asset growth more than offset the improvement in the retail auto net charge offs.

Retail origination momentum was strong throughout 2Q, finishing nearly $1 billion higher than our initial expectations. The growth supported earnings beyond 2Q, but drove $30 million of additional CECL build in the quarter.

an $0.08 headwind to EPS. Adjusted noninterest expense of $1.3 billion was up 5% year over year in line with expectations.

As noted earlier, adjusted revenue was up 10% year over year driving strong positive operating leverage. As we have successfully executed on focused accretive growth in our core businesses and disciplined expense management.

During the quarter, we recognized a $15 million expense related to the early redemption of our Series B preferred stock. This onetime charge reflects a strategic capital management action and given its nonrecurring nature is excluded from adjusted results.

Let's move to slide 7 to discuss margin in more detail. Net interest margin, excluding OID of 3.63%, was up 11 basis points quarter over quarter largely due to lower deposit costs.

Retail auto portfolio yield, excluding the impact from hedges, was relatively flat sequentially and in line with our expectations. Average earning assets were up 6% year over year with growth concentrated in our highest returning assets, retail auto and corporate finance.

Which on an end of period basis were up approximately 8% year over year. On the liability side, cost of funds decreased 12 basis points quarter over quarter driven by disciplined deposit pricing actions through the first and second quarters.

Retail deposit balances decreased $2 billion during the quarter driven by seasonal tax outflows in line with normal seasonality. We maintain access to a wide range of alternative funding sources which complement retail deposits and allow us to fund accretive asset growth in the most efficient manner possible.

During the quarter, we reduced liquid deposit pricing 20 basis points and reached a cumulative liquid deposit beta of 69%. We remain disciplined in how we price deposits, ensuring we continue to optimize customer growth and value, and are encouraged by the performance we have seen Deposit customers grew for a 69th consecutive quarter and are up 7% year over year, demonstrating the power of our brand in the market.

I will cover guidance later, but despite the movement in short term rate expectations year to date, we remain confident in our path to a sustainable upper 3s margin over time. Structural momentum is evident, our accretive asset growth and efficient funding sources, each supporting continued NIM expansion.

Turning to page 8. CET1 of 10.1% is up approximately 20 basis points versus the prior year.

While not final, under the current proposal for RSA, our CET1 would be above 9% when fully phasing in AOCI. And IRBA would provide roughly 30 basis points of additional benefit.

We will continue to assess each proposal as we await potential refinement following the comment period. During the quarter, we completed our fifth credit risk transfer transaction generating approximately 20 basis points of CET1 at the time of execution.

Reflecting continued demand for our retail auto assets in the market and another efficient way to manage capital. Additionally, we issued $1 billion of preferred stock at a 7.1% coupon.

The proceeds from the transaction were used to support the redemption of our Series B preferred stock ahead of its reset on May 15. The issuance resulted in a $350 million decline in our preferred stock outstanding, and favorable economics relative to the Series B reset rate.

In the quarter, we executed $148 million of share repurchases, And earlier this week, we announced our quarterly dividend of $0.30 for the third quarter of 26. Consistent with the prior quarter.

We remain pleased with our ability to execute a story of and, not or. We are delivering strong growth in core portfolios at attractive risk adjusted returns.

We have migrated capital ratios higher, and repurchased nearly $300 million of shares year to date. At the end of the quarter, adjusted tangible book value per share was $42 up 13% over the past year and when combined with our solid dividend yield underscores our continued focus on delivering strong shareholder value.

On slide 9, we will review asset quality trends. Consolidated net charge offs of 111 basis points were down 10 basis points versus prior quarter and roughly flat year over year.

During the quarter, the consolidated NCO rate included the resolution of corporate finance exposure. The loan was in nonaccrual since 2018, and we recorded a P and L benefit on this resolution as the specific reserves we had built exceeded our loss on the exposure.

Within retail auto, net charge offs of 157 basis points were down 40 basis points quarter over quarter and down 18 basis points compared to a year ago. marking a sixth consecutive quarter of year over year improvement.

On the top right of the page, 30 plus all in delinquencies of 4.8% were down 8 basis points from the prior year. While the year over year improvement in NCOs widened given record flow to loss, and supportive used values.

The year over year improvement in delinquencies continues to moderate as expected. Portfolio performance has been solid year to date, but the macro backdrop remains dynamic.

And while delinquency rates are down year over year, they remain a watch item along with used values and fore-loss rates. In total, we remain confident in the credit quality of the portfolio and our ability to be dynamic in underwriting, servicing, collections in the current operating environment.

Turning to the bottom of the page on reserves, the consolidated coverage rate of 2.49% was down quarter over quarter driven by the specific reserve release in corporate finance previously mentioned. Retail auto coverage of 3.75% is flat with the prior quarter.

Our coverage levels continue to balance consistent credit trends across our portfolios against broader macroeconomic uncertainty. Moving to slide 10 to review auto segment highlights.

Pretax income of $410 million was lower year over year primarily due to CECL reserve build associated with strong retail asset growth in the period. On the bottom left, we have highlighted the trajectory of retail auto portfolio yields.

Excluding the impact from hedges, yields were down 2 basis points quarter over quarter. Second quarter originated yield of 9.1% was down approximately 50 basis points quarter over quarter as S tier increased to 47% of origination.

The origination mix was influenced by normal seasonal trends, the measured posture we highlighted in April, and a higher quality application mix, including stronger pull through within those segments. As you recall, we had a richer credit mix and yield than we expected in 1Q, and we saw pivot in the other direction this quarter with a cleaner mix and lower yield.

The yield impact from higher S tier volume was partially offset by increased pricing on the like for like segments. Looking ahead, we expect S tier to decline modestly from 2Q levels, and settle in the low to mid forties over time which we expect will support originated yields absent moves in benchmark rates.

On the bottom right of the page, $13.3 billion of consumer originations were up 21% year over year as we continue to benefit from our deeper dealer relationships supporting application growth. Application volume remains the key to our success and highlights the strength of our franchise.

Approval and pull through rates remain consistent with prior quarters, but a wider top of the funnel provided incremental opportunities for accretive growth. Looking ahead, we remain confident in our ability to continue driving accretive growth that we would expect the year over year growth rates to moderate in the back half of the year.

Turning to insurance on slide 11. Core pretax income was $24 million up $26 million year over year.

Total written premiums of $382 million were up $33 million year over year. While insurance losses of $208 million were up $5 million year over year.

Insurance continues to drive capital efficient, diversified revenue and remains a key component of our long term growth strategy. We continue to leverage synergies with auto finance to sustain momentum within the business, and deepen our all in dealer value proposition.

As we help them succeed in all aspects of their business. Turning to corporate finance on slide 12.

The business delivered another strong quarter with record pretax income and a 32% ROE. The team has a proven ability to deliver compelling returns while also driving strong growth as the portfolio is nearly $14 billion today, up 25% over the past year.

Our long standing relationships and deep underwriting expertise are the foundation of our diff differentiated risk management framework. Credit discipline underpins every decision we make.

Guiding our growth and is reflected in the performance of the portfolio. Credit has remained exceptionally strong with nonaccrual loans at historic lows.

Results continue to showcase the durability of the franchise, and our prioritization of credit risk management will drive accretive growth moving forward. I will provide a brief update on our outlook before moving to Q&A.

First half performance has been solid. We are updating a couple aspects of the guide to reflect our latest view.

We now expect average earning assets to be up 3 to 5%, versus 2% to 4% previously. As our expansion of the top of the funnel has resulted in strong consumer auto originations alongside continued momentum within corporate finance.

As we have consistently emphasized, we are growing where we want to be growing while maintaining an underwriting posture to optimize risk adjusted returns. This accretive growth will drive higher earnings over time but it does present elevated reserve build under CECL in 2026.

Additionally, we are tightening our range on consolidated NCOs, which we now expect will land between 1.2% to 1.3%. Compared to the 1.2 to 1.4% range we shared in January.

Reflected within the guide for consolidated NCOs, is our outlook for retail auto. As I mentioned previously, we are pleased with the credit performance through the first half of the year, and view the midpoint of our retail NCO guide as appropriate.

With respect to margin, the guide remains 3.6 to 3.7% with the potential to exit the year above the high end of the range. While we continue to closely monitor the impacts of macroeconomic uncertainty, and evolving interest rate expectations, which now include rate hikes this year, we are confident in our ability to deliver.

The timing and magnitude of potential rate actions can influence margin for a period of time, but we remain confident in our ability to deliver on the full year guide. In total, our focused strategy and disciplined execution continue to drive improving operational and financial performance.

While we have made significant progress, our focus remains on sustaining our momentum and executing on the meaningful opportunities ahead to deliver compelling, long term value for our shareholders. And with that, I will turn it over to Sean for Q and A.

Thank you, Russell. As we head into Q&A, we do ask that participants limit themselves to 1 question and 1 follow-up.

Elizabeth, please begin the Q and A.

Hi, guys. Maybe to start on retail auto and credit there.

The net charge offs were better than we were expecting. And the year over year decline there is accelerating, but delinquencies are kind of like leveling out.

And then add to that, you have got the quarter with the big spike in S tier volume. How does that all come together, both in the context of the 1.8% to 2% net charge off guide this year?

And then also, like, zooming out the 1.6 to 1.8% loss rate you have talked about bigger picture.

Great. Thanks for your question, Robert.

it is a great question. And maybe I will just start by saying we are pleased with performance in credit in the first half of this year.

Think we have seen as we mentioned earlier, you know, we have seen record-low levels of total loss rate. And we have seen good support.

From used vehicle prices As you point out, yeah, delinquencies have remained stubbornly high. Clearly, we are dealing with the consumer.

That is dealing with affordability. Gas prices are also an issue.

Overall, I would say we still see this macro as dynamic. And, obviously, taking a measured posture in response to that.

All that being said, we are pleased with the credit performance in the first half of the year. And we are holding our guide at 1.8% to 2% as you pointed out.

We continue to think the midpoint of that range is an appropriate base case to center around. You know, as we think about credit evolving in the back half of the year, again, you know, the watch items that we are paying close attention to are obviously delinquency.

But, obviously, looking at total loss rates and used vehicle prices just given the support we have seen in the first half of the year from those items. You know, as we think about credit on a longer term basis, as you pointed out, we have been originating in the 1.6 to 1.8 range.

Know, the NCO rate that we have ranked given the in a given quarter is an expression of multiple vintages as well vintages that are at various stages of their life in terms of loss development. As we have said before, it is our expectation that we will get there.

We have not given a timeline to that. And, you know, as we have said before, that is, you know, that is the timeline that is going to evolve over time.

that is not something that we expect to get to, you know, in the next couple of quarters. You know?

And you talked a little bit about s tier mix in your question. You know, as we noted, you know, as you look at second quarter, the originated or the originated portfolio in the second quarter, You know?

F tier was elevated, it had some impact on yield during the quarter as well. You know, I would not read too much into that.

You know, obviously, if you look at first quarter versus second quarter, first quarter, we saw the opposite of that. We saw a richer credit mix and a richer originated yield.

And we saw pivot back in the second quarter. A lot of explanations for that.

Number 1, just normal seasonality. We expect to see a higher credit quality application pool in the second quarter versus the first quarter We certainly saw that.

You know, as we talked about in April, we have got a measured posture with respect to credit. And so that is certainly something that we would have seen impacting the mix as well through the quarter.

So all that being said, broadly, approval rates and pull through rates were consistent through the quarter. You know, it is certainly our expectation as we evolve over time We will see that originated mix migrate.

to an SDR mix that is probably more in the low to mid forties again over time. So I would not read too much into a single quarter's origination mix.

We have seen that move from time to time. You know?

And as far as we see it, you know, we think the opportunity for that mix to kind of migrate back to normal to provide support for originated yield as we move forward.

Russell, I might just add something. We are actually great that do not read 1 quarter if you take a step back and look at the consumer overall and you kind of even take a step back from our portfolio, what we do see is that there are certain consumers who are certainly working through the higher cost that we are seeing in the system, particularly on a higher energy cost.

Unemployment rates are still quite constructive. And so a dynamic you see is that consumers are basically triaging on a real time basis kind of how they pay every single month and then what they are paying.

And that can translate into delinquencies that I think we said in the last quarter that we were expecting the tax refunds have probably more of an impact on delinquency. We did not quite see that As you heard, I think we are seeing customers in delinquency more but as Russell said, the total loss rates have been quite constructive.

And so we are actually encouraged about what we see in unfloated loss. And feel very good about how the consumers are performing overall.

And, again, I just I would not over-read 1 quarter's worth of origination mix This does move around quarter to quarter.

Very helpful.

Thank you both.

Great. Thanks.

Pretty impressive growth numbers. You did mention that you expected growth to moderate some.

Could you talk about perhaps what is driving that? Is it what you are seeing from an application side?

Is it the competitive dynamic? You know, maybe just talk about that a little bit.

Thanks.

Right. Well, maybe I will I will start by giving our auto team a ton of credit here for the traction that they have delivered with our dealer base.

The application flow that we are seeing that is been really strong. And that is, you know, that is a credit to the relationships we have developed.

Yes. I would say also, you know, we have retrained our dealers over the last couple of years to really send us all their applications And in the last couple of quarters, you know, we have also aligned our dealer rewards program and our overall strategy in terms of how we think about commercial conquest.

All aligned around incentivizing our dealers to send us all of their application volume. And so that strategy has been working out really well for us.

We think it still has a runway ahead of it. And so, you know, our expectation is we will continue to see strong application flow That strong application flow gives us an attractive opportunity set in which we can really target to have, you know, 1 strong origination that, obviously, in terms of volume, but also where we have the ability to manage yield and credit.

In order to target originations that deliver for us on a risk adjusted basis. So a lot in there, but a lot of kind of what we see is the strength that is been really driving that growth in application volume and thereby fueling the growth that you see in origination volume.

Great. Thanks.

And you know, I think the area in which, you know, the results you know, kinda were lower than our expectation was purely in that reserve build area that you had noted. Driven by that faster growth.

Know, as you look at that moderating growth, I think you mentioned that should have more moderate build in reserves. Anything that you would kinda highlight in terms of the tenor?

You know, obviously, you had high-quality loans originated this quarter, but anything that you would kind of point us to in terms of that you know, that reserve rate as we go forward?

Yes. Our overall reserve levels on the auto side at $3.75 Yes.

They have held there that accounts for a number of things. Know, obviously, we have we have continued to see good performance and improvement in terms of NCO levels.

And delinquency rates in terms of our own portfolio. Yet, at the same time, we are accounting for a macro that is dynamic and has some degree of uncertainty.

into it. Yes.

As we have said previously, you know, we do not plan around reserve releases as we think about you know, our portfolio or our financials on a go forward basis. Yes.

But I would say the reserve rate that we have now, we think kind of accounts for both of the things that we are seeing in terms of performance in our current book, which we characterize as good. As well as that macro uncertainty.

That we see in the background.

Thank you.

Thank you. Good morning.

I guess I wanted to go back to the S tier originations. I know you guys said not to read too much into it.

But as we think about the NIM expectations, I think it actually improved despite you guys doing this. And it sounds like you are gonna originate at a slightly higher run rate on s tier at least for the short run.

Am I thinking about that correctly? And maybe you could just talk about what is driving that higher mix?

Is it that there is these opportunities in front of you where there is a competitive void? Or some proprietary flow coming through?

Just if you could help us with that too, that would be great.

Yes. Thanks, Sanjay.

So it is a good question. And maybe I will start with the S-tier, and then I will get to your question on the read across to NIM.

You know, on the S-tier again, I would not read too much into a quarter. There are a lot of things going on.

I think there is that seasonality we pointed to earlier Yes. Certainly, our measured posture with respect to credit played into it as well.

But, again, I would not read too much too much into it. When you kinda think about the originated yield, I think it is important to point out that when we look at our originations on a like for like basis, going from first quarter to second quarter, we increased price.

So, you know, you saw the originated yield come down, but actually embedded in that is you know, increased pricing on a like for like basis. But, obviously, you know, overpowered by the movement up in credit in terms of that extra mix moving from the low forties to 47 over the over the over the course of the quarter.

And so I think that ability to put price into the market is a is a good sign that I do not want to be overlooked here. As you think about the forward, in terms of, you know, how to think about our originated yield and how that translates into the into the portfolio yield.

Yes. I would say 1, we as you pointed out, you know, we do expect that the mix will continue to move around We would expect on balance, it is gonna migrate towards a lower SDR mix.

You know, we talked earlier about low to mid forties, albeit over time. That provides some support.

You know, independent of benchmark rates that provide some support to the originated yield. As we think about portfolio yield, our expectation is you know, it is it is gonna be stable at, you know, at current levels as you think about the next few quarters moving forward.

The read across to NIM, however, is a little bit different. We still continue to expect our NIM to increase You know, we showed a nice increase going from first quarter to second quarter.

A lot of that is on the back of changes we made in deposit pricing. Over the course of first and second quarter.

Those changes still have runway in the third quarter. As you think about kind of the last price change on a full quarter basis.

We also continue to have a benefit from a NIM perspective from CD maturities, as we have kind of higher-yielding CDs maturing and rolling into, you know, for the most part, rolling into liquid deposits. Or other CDs at lower rates.

And then on a long term basis, we have a continued dynamic where we have low yielding mortgage loans and lower yielding mortgage backed securities that continue to roll off our balance sheet. At the same time that we are really growing our higher yielding retail auto loan and corporate finance portfolios.

So there are a number of dynamics you know, some that play out stronger over the next quarter or 2, some that play out over a longer period of time that continue to contribute to that net interest margin expansion story that we have been talking about for some time.

And, Russell, it is interesting. I think back at the I am sorry.

Sanjay is gonna mention me. We think about the kind of quarter origination mix.

A lot of this stuff does work so well because of our top of the funnel at volumes. I know we talk about this a lot, but it is really incredibly powerful.

And real testament to what our teams are doing every single day. Because you see the top of the funnel increasing the high teens.

It gives us the ability to constantly optimize, and our optimization this month might be different than 1 month, might be different than the month after that. All that being the case, you look at our share of volume that we are actually capturing.

It keeps on increasing. We keep on increasing more share with an optimized mix which is why we say, look.

You know, these strategies are not set up and forget it. You know, we are always optimizing and looking at what the market has and where pricing is and where pricing and risk match.

And the top of funnel volumes make all this possible. And it is a real testament to, I think, the Powerball franchise And hats off to the team that is making this happen every single day.

100%.

Thank you. that is very that is very encouraging.

Michael, just to just to make sure I am not missing something, because I know you touched on it earlier, just this measured approach on growth and obviously credit It sounds like those are just sort of the broader macro trends, nothing specifically that you are seeing inside your portfolio on how consumers are behaving. Correct?

Because the credit numbers look pretty good. Just making sure.

Thanks.

The credit numbers are good. Yeah, we are being measured and, I know you have probably heard of a cautious tone from us over the past year and a half, I feel it is.

Ever since the tariffs came into place and they have been working through those And now with oil prices and, you know, they kind of inflect on a day-to-day basis, So, you know, right now, like, the uncertainty in the environment just feels a lot higher than a normal steady state uncertainty. And that kind of volatility, the beta around the environment is why we use words like measure.

And it is reflecting in some of the approaches that we are taking in our underwriting or volume creation. But we are we are building this business for the long term, and we think we are making the right decision every day.

Given the fact that there is a lot of uncertainty in the environment. And the environment, you know, hopefully settles down soon, then we will hopefully stop using the word measured a bit more.

But between now and then, that is the world that we are living in. And like, even just 3 weeks ago versus today, I mean, I think your conversations would have been different.

And, you know, hence, that is reflected in some of the language we are using.

Thank you.

Hey. Good morning.

2 questions on credit. Maybe to start on retail auto.

And Russell, I think you mentioned the vintage stuff you look at. I mean, for a while here, there is been this kind of built in improvement because the 22 and 23 vintages are burning off, and then the 24 and 25 vintages are pretty consistent at better levels that you used to show us.

I wonder if you could just talk through that dynamic First, is the 2022-2023 vintage burn-off. Still a good guy?

Or is that kind of played out then as you look at the 24, 25, I do not know if it is too early to look at any of the 26 originations. Are they all steady?

Is there anywhere where you are seeing vintages improve or deteriorate from that kind of post 23 level.

Great. Thanks, Brian.

it is a great question. You know, as we mentioned earlier, when you look at our NCO rate during a given quarter, it is an expression of you know, a lot of vintages at various points in their life cycle.

And so while we have mostly been through the 2022 vintage, we still have loans on our books. From 2022, and so they are still contributing to our overall loss rates today.

Yes. And, obviously, we still have loans, obviously, from first half 23 as well.

You know, as you pointed out, as you entered kind of the back part of 2023, certainly as you enter that 2024 vintage, we saw a number of vintages that had the full effect of curtailments that we had put in place. You know, as we have said previously, those vintages have exceeded our expectations in terms of performance.

They continue to exceed our expectations in terms of how they are performing. As you would expect, you know, and as Michael pointed out earlier, you know, we make decisions around underwriting and pricing on a real time basis.

it is a dynamic process for us. And seeing that outperformance in 2024 We made changes throughout the course of 2025 We do not expect to see that same outperformance on the 2025 vintage versus 2024.

But, again, still a very strong vintage from our perspective from an economic perspective.

And so, as you look at our NCO rates during a given quarter, there is a lot going on in terms of the different vintages. But, again, we continue to see kinda what we have been talking about in terms of you know, some benefit from the ongoing roll off of that 2022 and first half 23 vintages.

You know, positive contribution as we see that outperformance of the 2024 vintage. And then you will see some normalization as we work through the 2025 and 2026 vintages.

Right. There are items that you know, 2022 vintage was, you know, clearly a tougher vintage, both in terms of what these delinquency curves look like the vintage curves, but also what the severity was.

And, you know, we much feel that severity hit with this by a 1 time thing. And so when you look at it, you know, all in, we are working through 2022, and that is good.

But, you know, we feel good about where we are positioned.

Thank you. If I could sneak 1 in on corporate finance, and I am looking specifically at page 15 in the supplement.

And I do not wanna miss the forest for the trees. it is only 4% of your reserve.

Even with the loss. it is only 6% of lost dollars year to date.

But it gets outsized in interest from investors given everything going on in the market. So I wonder if you could just speak to this new coverage ratio 1.19% now that large, legacy health care loan is gone, is that kind of a normalized level for this business?

2, are there any other loans similar to that health care loan that have been hanging out for a while that may require resolution. And then 3, if it is meaningful, is there any difference in that reserve level for the private credit versus the rest of the book?

Right. there is a lot there to unpack.

I will try to I will try to get through it. You know, maybe I will start with the health care loan that we charged off over the course of the quarter, and maybe that is a good start given some of the headlines I think it is important to point out that this is a loan that we made in 2015.

it is part of a vertical that we are no longer playing within corporate finance. This loan was actually put into nonaccrual status back in 2018.

And I think it is a credit to our team in corporate finance They are really a credit-first, truly a credit-shop perspective in how they manage the business. But they work through this loan, obviously, over the course of a long period of time.

Reserved for it conservatively. And got us to a good place where it was a P&L good guy in the quarter in that our charge off was less than the reserve that we have built up over time.

And so overall, led to led to an overall release. When we think about the book more broadly, our criticized assets and our nonaccrual loans are at historic lows.

In the portfolio. And so it speaks to, again, the credit first culture that we have built within our corporate finance business.

And the fantastic job that they have done over a long period of time in terms of in terms of managing credit.

We do not run this business as a zero loss business. This is a business where we expect losses, and we have a team fortunately, that is able to work through tough credits and often get to what we think are good resolutions of those like they did in this particular case.

But we do not run it as a zero loss business.

And so when you look at our reserves at any given point, time, it is a combination of the kind of modeled loss reserve specific reserves on specific loans, you know, and then obviously some degree of management discretion as well. You know, given the large charge off we saw in the second quarter, our specific reserves have obviously come down meaningfully.

And so that is what you are seeing as you look at the change in reserve levels for corporate finance and, quite frankly, even on a consolidated basis for Ally overall. You know?

And so as we kinda manage the business, you should expect that in corporate finance, given the lumpiness of that business and the way credit evolves, that you should see some movement in that overall reserve number over time. You know, as you look at the dynamic between the different types of reserves that we hold in that business.

But in particular, you know, as you see various items moving on and off the specific reserve, Yes.

A couple of other things on that. I am like, we do not have any additional loans like that in our portfolio.

Yes. I had mentioned private credit.

Private credit portfolio is strong. And then just maybe just underscore here something.

It may be obvious. But we have our narrative in terms of how we are gonna generate mid teens returns, and we talk about 3 drivers that lead to that.

Each business plays a role. And I hope you see in the results that we have been generating and the way corporate finance performing and growing, they are a very important component of our overarching story in terms of how this business is going to perform.

It was just 1 loan. I think the team handled it beautifully.

And I think the way they handle it shows our effectiveness in working out loans, our conservatism in terms of how we take our marks. And if anything, I think this should give a lot of confidence that this is gonna be a really important part of our business.

Thanks so much.

Hey, good morning, Thanks for taking my question. Just wanted to maybe focus on the expenses a bit here.

You are pretty clear that the year over year growth rate would accelerate this quarter, I think, to some noise or some differences in the comps. But as we think about your unchanged guide for the year, does as you noted before, seem to imply a 3% growth rate from here.

Is that the right way to be thinking about the level of expense growth required in the business? Or you know, as you sort of have seen your revenue growth step up here, maybe just help us understand how you are thinking about the operating leverage story from here, maybe the opportunity to reinvest back in the business?

Great question, Jeff. Thank you.

Thank you very much. Yes.

As you pointed out, you know, expenses in the quarter were very much as expected. I think it is also important to point out the positive operating leverage we saw in the quarter with you know, expenses up roughly 5%, but revenues up 10%.

You know? And it is as you asked, it is our expectation that we will continue to show positive operating leverage on a go forward basis.

You know, I think your commentary around the outlook, the forward outlook on expenses, I think, is appropriate. Obviously, we do not provide guidance for 2027 or forward.

We will do that at some point in January, but I think your kinda overall observation makes sense. And, obviously, we will we expect to and we seek to grow revenues faster than that than that and continue to benefit from operating leverage on a go forward basis.

And I would characterize that as a benefit of our focus strategy. Right?

We are we are focusing on businesses where we have competitive advantages, advantage businesses where we have relevant scale, and our growth story is very much doing what we have been doing very well and doing more of it. And that puts us in a position really to drive that positive operating leverage on a go forward basis.

Great. And just as my follow-up, the share repurchase trend, you have kept that now at about $150 million a quarter over the last few quarters.

Is this sort of the right cadence to be thinking about from here? Are you maybe waiting for more final confirmation around the new capital rules before you, re-evaluate that trend?

And maybe just remind us is the right target post capital rules to be thinking about here still the 9% level that you have thought about historically? Or just kinda help us understand what you are thinking about on the capital return path from here?

Right. Well, I think maybe start off by saying we are pleased with the capital build that we have executed on over the last couple of years.

You know, you know, obviously, the proposals are still proposals. They are being commented on.

You know, we do not have the timeline for implementation and, obviously, they have not been finalized yet. But as we look at RSA on a fully phased in basis, we are north of 9%.

Which is the management target that we have talked about for a number of years. That positions us really well.

You know, you know, from our perspective, a heavy lifting on the capital build is largely behind us. And we are positioned now to execute on our story of and, not or, And our expectation is we will continue you will continue to see a lot of what you have seen in first half of this year.

Strong emphasis on providing capital to grow our businesses in an accretive way. You know?

And also a focus on share on capital return to our shareholders, both through our dividend as well as repurchases. You know?

And a capital ratio that, again, we expect to drift higher over time. But, obviously, with the heavy lifting in terms of capital build, largely behind us.

So we think we are really well positioned on the story of and here to support the growth of our businesses and also return capital to shareholders. We are not gonna make any particular promises or guidance in terms of the volume of share repurchases you know, as we progress through the quarters.

Except to say that, you know, we are not growing for growth's sake. Yes.

We are growing where we believe it is accretive and additive to the business. And from our perspective, you know, share repurchases are, you know, in a fast-paced plug.

They are kind of what we do after we care for accretive growth in the business. and our dividend.

Great. Thank you, Russell.

Hi, good morning. Just wanted to quickly follow-up.

On the deposit-funding side. You kind of alluded to not a lot more juice to go lower.

When I look at your OSA rates, seems like you cut them twice in the quarter. And then CD rates roll on and roll off are roughly the same.

So to think, like, maybe 3, are you anticipating Q3 is kind of the floor mainly just from the averages on that end? The OSA rate specifically.

Yes. Well, I would say, look, on the cuts during the quarter, we will have the benefit in third quarter from having those cuts in place for the full duration of the quarter.

And so there is still some juice left in overall deposit costs. From that in the third quarter.

On the CD roll on roll off, you know, a lot of our CDs actually, when they roll off, the customers roll them into OSA, and so we still expect to see some benefit. From CDs rolling off in into OSA as you progress through third and fourth quarter So we continue to have those benefits that will win.

So in terms of the broader economics of deposits, you know, your part of that depends on what we see in terms of Fed funds.

Our current expectation, you know, we use the forward per curve as of June 30, I think it was. And so we had 1 hike in place I think, in September of this year, then another hike early next year.

You know? And so, obviously, a hike affects the path for us.

They affect the net interest margin that we print in any given quarter. They do not affect our destination in that our deposit pricing turn tends to our deposit pricing in our asset side of our balance sheet tend to react over time.

And so our destination in terms of the high threes that we have been talking about for quite some time remains unchanged. But, obviously, in any given quarter, you could you could see some movement in terms of terms of the path we take there.

So to Russell's point, I mean, it is ebbs and flows, but the direction of travel is still north.

Yes. No.

That makes sense. I was just trying to kinda get too cute here with the timing and modeling over the next 6 months.

But when you guys think also just average earning asset mix, like, securities are obviously much lower yielding than your loans. Is this mix appropriate?

Or can you think loans could be a little bit bigger in terms of average earning assets? I guess it is more of a cash flow, but I am just trying to think, like, longer term where that direction of travel is.

It could be a better mix from here. I think in terms of yeah.

I think in terms of mix, maybe I would start with the mortgage loan. That portfolio is in runoff.

And so that runoff will benefit us. The yield on the mortgage loan is about the same as the securities portfolio.

And so yep, that kinda rolls off. And then, you know, we have been growing our retail auto loans and corporate finance at a pace quicker than our earning assets overall.

And so you would expect, basically, mortgage loans to run off, retail auto loans, and corporate finance loans growing and contributing to NIM expansion. The securities portfolio is a little more complicated because you have got-- we have got within that portfolio a legacy of lower yielding securities that we continue to run off.

But at the same time, we are reinvesting in that portfolio because we do need to maintain liquidity for a whole bunch of different reasons. And so within that portfolio, you do have a runoff of older, lower yielding, mortgage backed securities and then a roll on of investments you know, albeit in a shorter duration targeted portfolio but a roll on of securities at a higher yield given the current interest rate environment.

portfolio, and so that 1's a little bit different. In terms of the overall size of the investment, I would not anticipate any major changes in the sizing of that going forward.

Yes.

We do have to care for kind of overall liquidity needs across the business. Okay.

But the pricing is the requirement. Okay.

that is helpful. Thank you.

Hey, guys. Thanks for taking my question.

Look, 1 of the things we have observed to historically, and I am not convinced it is as pronounced these days, is that when gas prices spike, consumers substitute types of vehicles, and it creates distortions, in terms of used car prices. I think over the last decade, U.

S. Consumers have become pretty sanguine about driving big S SUVs, and that is been 1 of the things that is contributed to price stability of used car prices.

I am curious if there is anything that you guys are seeing right now in terms of auction prices by vehicle type, that we should be thinking about or anything interesting in terms of consumer behavior in terms of vehicle substitution.

Yes. No.

it is a good question. And, yeah, obviously, there is there is there is always a lot going on there.

there is vehicle type. There are the gains at various manufacturers been making in terms of fuel economy even for some of their larger vehicles.

Yes. There are some of the issues that individual OEMs have been dealing with from time to time in terms of recalls and other issues.

So there is a lot that we could kinda go into there. You know, kinda maybe just to get directly at your question, And I think you know, kind of 1 area to look at is EVs.

And we have seen, you know, kind of more interest in EVs and hybrid electric vehicles as we have seen elevated gas prices. You know, again, there is always a lot going on, and in some cases, that is overwhelmed by issues that are going on with particular OEMs.

But I would say on the margin, there is probably incrementally more interest in those vehicles and, you know, and also in kind of more fuel efficient vehicles. Generally.

And is that dampening some of the sort of accelerated depreciation and quicker obsolescence of those newer types of vehicles that we have experienced over the last few years.

No. I would not say that.

And, again, there is always a lot going on in broadly speaking, used vehicle prices have been strong. And so that has been helpful to us as we see, you know, as we see you know, cars coming back from lease.

As well as we have seen kind of resolution on repossessions. So overall, broadly speaking, used vehicle pricing has been strong.

You know, again, you know, there are always individual issues with particular models. Some of that we have talked about with respect to our lease portfolio.

Historically and has led to changes in how we think about depreciation rates. But I would characterize those as more targeted to specific OEMs and models that have encountered issues that are specific and particular to them.

Got it. Okay.

Always interesting. I appreciate it very much, guys.

Thank you. Okay, Rick, thank you.

Do we have any more questions? that is it.

I might just take a moment, and we still have maybe 2 minutes. and thank everyone for joining the call.

But second, just provide some reflections here. The reflections really on the quarter and kinda where we are in our path.

And often, I think this quarter really provides wonderful evidence that our strategy is working. For a while now, we have outlined our path to higher returns is dependent upon 3 drivers.

Lower auto losses, higher NIM, and disciplined expense in capital management. And I think you can see we are making progress, very good progress in all 3.

And it is showing up in the business. And, you know, the combination of, you know, earnings up 20 plus percent year over year for this quarter, up 60% plus last year.

On a year over year basis. And we are doing that and growing our core businesses very well.

We have auto originations up 20%, corporate finance 25% in loans, and our consumer bank have a 7% increase in customers. Which is a great number for a retail bank.

These are very strong growth numbers. On top of very strong earnings numbers.

Look. Appreciably, there will be ebbs and flows from quarter to quarter, how things are going.

But we feel very confident about the destination and the direction and the path this is a fundamentally different ally. We are driving stronger performance, greater resilience.

And definitely see a path to continued improvement. So thank you for joining the call, and I appreciate the support.

Thank you, Michael. that is a great way to wrap up.

If anyone has any additional questions, as always, please reach out to investor relations. Thank you for joining us this morning.